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Us 17, Greece 11, Trish 8, Washington 7, Ben Bernanke 7, Toyota 6, Jim Bob 5, Akio Toyoda 5, S&p 5, Steve 5, Melissa 4, Pepsi 4, Bernie 4, John 3, Bennett 3, Lamar Alexander 3, Jamie Dimon 3, Mr. Bernanke 3, Lebeau 2, Mary Thompson 2,
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  CNBC    The Call    News/Business.  
   Market coverage. (CC)  

    February 25, 2010
    11:00 - 12:00pm EST  

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welcome to "the call." i'm melissa francis in with trish regan. two events going on in washington as stocks sink on wall street. we will monitor that throughout our show and we are also monitoring president obama's health care summit at the white house as he tries to salvage his reform legislation. it doesn't look like republicans are buying it, though, so far, but first we want to get you caught up on the markets. that's one of the biggest stories so far today. it took about five minutes for stocks to give all of yesterday's gains. plus worries that greece could get downgraded right now. take a look at the s&p and how it's trading. coca-cola enterprises is the only thing propping it up. it's up 33% right now. the s&p traded the down side, the dow, we didn't get a chance to show you, but the dow is down
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165 points and that's a percent and a half. coca-cola company is the biggest loser within the dow and the nasdaq is trading to the down side by almost 1.5%. let's show you the vix, the volatility index, to give you a flavor of what's going on today, it is up at the 20 mark. trish, what's happening on the floor? >> oh, big, big, big day, melissa. part of this is the story of the economy. yesterday we got negative news on the housing front and the consumer front and that's compounded today by the news of jobless claims. so a lot of worries about the economy and whether, in fact, we are on the road to recovery that the market had anticipated. so you're seeing a triple digit sell-off. financials, i want to point out, they are lower in part because of the greece situation, and also because fed chief ben bernanke is saying that they're going to look into the swaps specifically with goldman. so that is an issue, of course, as well. i want to bring in brian shactman who has been down here all day and tracking all of this action.
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a very big day, indeed, brian. let's talk about the economic situation and how the jobless claims are affecting this market. >> the truth is when americans woke up today, we will have a negative open because of europe. the concerns over greece, of course, made the euro softer and the dollar strengthen. we've had a real correlation with the dollar and the euro in eshgsz kitties and jobless claims hit and it was muted and boom, we bottomed out and they were a concern today and we have traders saying this is a 70% greece and the others is saying 100% about jobs. a lot of earnings and there's a big, big deal that we want to talk about today as well. >> coca-cola enterprises. this had been to some extent, somewhat expected within the m&a community. when you see a deal like this a multibillion deal, one would have to think that it could help the market a little bit because you don't see deals like this until sentiment starts to return, so how much of an effect is this having? we know coca-cola has been
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dragging things down this morning. it's kind of a sector situation. pepsi is closing its deal for its bothers. we have coca-cola that comes in. it's a cashless transaction even though they're getting a $10 per share dividend with coca-cola enterprises and they want to get more nimble. it's not just about coke anymore and it's about other things going on and vitamin water and other things. it was a kind of a response to pepsi, and i always want to point out dr pepper and snapple, they had decent earnings and this is going to help them. so they're up today, actually on this news. people forget about pepsi. coke said a little while ago they're not going to do this and they came out and did it. >> real quick, gold stocks, before we go. >> fascinating. newmont mining is up, and it's carrying all of the other stocks up with it. so you just want to keep an eye on that. it's not an issue of where all of the metals are up. >> get over here. hey, grasso don't go away. we have questions for you.
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steve grasso and bernie mcsherry. what is the impetus for this market for this downside. why are we seeing so much? greece, jobs, both? >> go ahead. >> in terms of greece people are starting to get the deja vu rally, and everybody told us to not worry and we'll fix it is problem and we're worried about that a little bit over in europe and it's still coming back to jobs, you know? we're just not getting them and that's really a problem. >> real quick, a bank issue there that bernie just mentioned. we heard fed chief ben bernanke say that they are going to look into goldman sachs and that the swaps might be an issue. how much of that is factoring in? >> i think a lot of this is unknown territory. the problem is that there's so much unknown that people don't want to step into this marketplace because they feel like they're getting in front of a train right now. greece is definitely a huge part of this right now. we're looking at greece and the rest of the euro zone and there are a lot of unknowns that are keeping on the sidelines. >> where do you think we close here? do we continue to go down or is
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this market going to go down? >> i'm hoping to stabilize. we've got a snowstorm going here in the northeast and a lot of traders are trying to get their positions closed down for the day and they're hoping they can move on. much of the volume a bit. >> steve, do you agree with that or how would you trade the rest of the day? >> i think the upward trend, the s&p is at 1087 right now. we'll probably finish at 1095. so i think we'll trade higher from here. >> let me ask you about the coca-cola deal. there was some expectation that this was coming. pepsi had previously announced a similar deal. when you see something like this shouldn't it help the market a little bit because it's showing that there's some sentiment that people want to do deals? why isn't that having more of an effect or is it? >> i think it's wugzing a little bit of what's going on. people are starting to come back in there and there's a lot of money on the sidelines and the fact that big companies are finding what they perceive to be bargains is encouraging, but we're fighting across strong
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headwinds here this morning. >> plus there's something else, trish, traders are still confused why we're still talking about health care. why is there a health care summit. everyone agrees that we need health care reform and let's start with mandates and let's give it a shot first, but the fact that after the scott brown election that was still talking about this and harry reid is talking about a cramdown frustrates traders. end of story. >> do you agree with that or that just steve's own little political soapbox, not that i disagree with him. >> ask bernie this, bernie do you have the guts to agree with steve? is. >> i'm not sure it requires guts, but there's uncertainty across the board and we have financial regulatory reform out there and it's just dragging on. nobody knows what rules banks will be operating under going forward. how will they make money? and they're going forward is part of it. >> it's a combination. >> -- fixed income margins are getting squeezed. so if these banks -- >> why don't you tell me what they need to be doing? is do they need to shelf the plans until the economy is
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fixed? >> listen to people and understanding yes, we agree that there needs to be some regulatory reform. >> i thought gridlock was good and maybe nothing will happen as a result. >> gridlock is good during good tiemz. the idea that the people in congress and the administration can't screw thingsz up, but when things are going poorly as they are right now they need to come together. >> melissa, where do you see gridlock? there's 30% of the debate. >> nothing's happening with it and financial regulation, they keep putting it off. we thought it would be resolved by now and some people like you thought it would be resolved by now. >> why keep talking about it? >> talking about someone to invest billions and millions upon it when we talk about the marketplace, do you know for a fact that health care will not get done? do you know for a fact that gridlock will stop it? you can't answer that question with a yes, because if they could these guys can put their money to work. that's why corporations are not
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hiring. >> it's at 164 and you really think it's what's prompting it. >> it's not just the gridlock, we're worried about greece. greece is the size of tennessee. we have california and new jersey and states all over this country that have gridlock in their own state legislatures and don't seem to have the ability to address their own problems and that's the next worry. >> what about durable good orders up 3%. that was one bit of good news so far today. does that give you any hope out there that the economy is turning around? >> we've had a bunch of good news. we have great positive earnings and great data points but the market went from 1150 in the s&ps when we started talking in the middle of january about a bank tax on companies that paid back the t.a.r.p. to 1100. there were sovereign worries. >> all right. all right. we will leave it there. thank you so much, bernie, steve, always good to see you guys. you look tan. >> i've been skiing in the olympics. i won a bronze, but they didn't cover it. >> steve grasso in the role of larry kudlow. coming up next, did bernanke say all of the right things on
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the hill? we'll get some reaction and analysis from mr. steve liesman, rick santelly and former fed vice chair vince reinhardt. >> and president obama holding a health care summit today. will there be effective reform or is this just political folly? we will discuss it right here on "the call." we'll be right back.
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state member banks and they provide us very important information about the economy. we can learn from them what's happening at the grassroots level, what's happening to lending and, you know, to get to your question, that kind of information is very valuable for us as we try to understand what's going on in the economy. the -- as you point out, the community banks have, in many cases, when they're able, when they're strong enough, have been able to step up and provide lending. they are very important lenders to small businesses, for exam e example. and as you say, and this was the issue that senator bennett was
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raising with one of the proposals that the treasury's made is to create a fund that would capitalize small banks to demonstrate they can lend to small businesses. in the previous conversation with senator bennett i will not endorse or not endorse that approach. there are other approaches also for addressing small businesses, but i would say that if you go do that, one suggestion the treasury makes which is to separate it from the t.a.r.p. and maybe to pass it, to address senator bennett's question, to pass it separately so it is not citiing mattize, that that would be a successful program and we certainly do value. >> we're listening to ben bernanke testifying on capitol hill. today he is in front of the senate banking committee. joining us now to discuss everything he has said so far is
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cnbc's steve li liesman and rick santelli and vince farrell. vince, i want to start with you because the main issue here is that we have shifted the crisis from private balance sheets to private balance sheets and now the whole world and the market is wondering what are they doing here? what do you think is the best course from here as somebody who sat in those seats? >> so the reason we talk so much about the exit strategy is to re-assure investors? some of his colleagues that the fed will do the right thing when the time comes and that gives him a little more slack right now to be accommodative for longer. so the strategy is to give enough details about the exit, to provide that reassurance, but not so many details that leads people to think they would -- they're going to tighten some time soon. my own preference is they should talk about where they want to wind up. what kind of inflation rate they want two years from now and also how responsive they're going to be the unemployment rate in
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between. >> rick, is the market buying that? >> i'll be frank with you. i would be hard pressed to tell you that what's going on in these hearings is having a huge effect on the credit markets. i mean, virtually you still have zero rates. look at t-bills even with the uptick over the 56-day bills they were auctioning off with the supplemental financing issue. no, there's not a lot of attention to be paid, it's a fait accompli for many traders months and months ago that they're not going do anything through 2010 and the exit strategy is like any other forecaster and a lot of forecasters haven't had a good track record in the last couple of years. >> we actually heard him make that point, rick santelli, just yesterday that there were some concerns that one could argue that there were concerns in the bond market. of course, we know you've certainly been saying that as of late, but let me go over to steve for a moment. i mean, when we talk about leaving rates as they are in the near future, at what point can this conceivably begin to shift?
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when do we reach that balance where we can start to raise rates, the fed can, and it won't have a detrimental effect on this economy? >> yeah. i mean, first of all, i dramatically disagree with what vince said. >> shocking. >> what's happening in these hearings is all of the fed rhetoric right now is about why interest rates are where they are right now. they have successfully so far rhetorically kept a lid on interest rates and one of the things bernanke, in fact, urged during the hearing is if congress wants to do more stimulus and he's careful not to say do it, if you do it, do what we're doing essentially is give us a blueprint for the exit strategy five years down the road and how you'll get control of deficits. he said this in the hearings the last two days, trish. he said that if you come up with a credible exit strategy from deficits it will bring down interest rates today. >> it gives us more flexibility. >> it's very important. >> it gives him more flexibility
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in the short term. >> right. in the world of inflation worries by a federal reserve or a central bank, the inflation rate is the bank's target rate. that's where they're they've convinced everybody 100% credibly they will do that. i have to say looking at where rates are the fed has to have some good measure of credibility in the bond market right now. >> but back to the question of when do you hit that balance? do you have any sense, steve? you pore through this data every single day of where we are and where we're going. >> i think the data has taken a pretty major hiccup right here between the con glens board and the consumer confidence numbers and the jobless claims number. we are nowhere near to where they'll feel secure with interest rates. they want to see several months in a row of stronger employment to make them feel that that's entrenched. bernanke said the economy is quite weak and that is a disappointment. they are nowhere even near -- even rhetoric, let alone the actual data, trish, to give them
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confidence about raising rates. >> i like his point, you want to know what my exit strategy is? what's your exit strategy from all of that spending? it's essential. first, we may not believe that we'd do it, but we would like to hear it. >> there are two points i would like to make in terms of steve. good fiscal policy makes monetary policy easier. bad fiscal policy makes it harder and that's the position ben bernanke is. the second thing is ben bernanke has been on message and one thing he's been successful at is clearing away the awkward brush before his testimony so he can focus on the economy. that's why he had the discount rate increase before the hearings. that's why he testified on the hard stuff, the complicated stuff, the exit strategy two weeks before his hearing and that way he can say we've already addressed that stuff and that's why it's not an event for markets. he's already clarified those events. >> all right, steve, last word.
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you want to react to that? >> you know, i'm not sure i agree with vince on the idea that the fed has been quite so live in how it's announced some of these things. i think it stumbled a bit and made markets a little spooky last week about whether or not this was the beginning of tightening. i think bernanke needs to be more on message, more communication. i think when he throws out abidea that maybe we have to target reserve balances, there is a dramatic conversation to take place between the federal reserve and markets right now to understand where we're going. i think they have credibility that they'll do the right thing at the right time, when, where, why and how, still needs to be explained. >> rick, you're grinning. >> and he's looking off camera. rick, what's your final word? >> my final word is i am very impressed with mr. bernanke. so say the word deficit so many times today, i think no matter how you slice it it, mr. greenspan always tried to impress on the congress that when implementing fiscal policy, if you're going to do things like raise deficits, do it with
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the return and make sure you watch spending. he's on the right track. >> yeah. okay. we'll leave it there, thanks, guys. don't miss steve liesman's interview with chicago fed president charlie evans. that is tomorrow on "squawk box" at 8:00 a.m. eastern time. president obama is hoping to revive his plan for reform, but has health care overhaul simply become political folly? we'll discuss that coming up next. cnbc's phil lebeau talks to akio toyoda. he'll tell us what the company is doing right now to fix its cars and its reputation, for that matter. you are watching cnbc, first in business worldwide. we are back in ten minutes.
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hammered today. remember earlier in the week it had been above $80 bucks a barrel. it is down 2% on the day, 77.47, trish? >> president obama trying to revive his health care plan by holding a six-hour long telev e televised summit with congressional leaders from both parties. the big question, are they going to accomplish anything. john harwood joins us with the latest. john? >> reporter: well, trish, they are accomplishing things, but it's not going to be in the form of legislation. it will be in the form of making
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rhetorical points and we've seen them off to that start already, and i think the bright side for republicans is they started off with a very effective speaker, the former governor of tennessee, lamar alexander is now the third ranking member of the senate leadership and he offered a very cogent critique of the democratic approach and said you ought to scrap it, start over. and president obama, on the other hand, has no intention of starting over and you have a little dialogue in the beginning when the president and lamar alexander got off. let's take a listen to how this thing got going. >> i hope that this isn't political theater where we're just playing to the cameras and criticizing each other, but instead are actually trying to solve the problem. that's what the american people are looking for. as controversial as the efforts to reform health care have been thus far, when you ask people should we move forward and try
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to reform the system people still say yes. >> make that our goal. reducing health care costs and start over and let's go step by step toward that goal. >> i say to my friend lamar, who i have great respect and admiration for, you're entitled to your opinion, but not your own facts. your opinion is something that is yours and you're entitled that, but not your own set of facts. >> so you can see it started off with both sides really going fit for tat, in the way the -- if you were a democrat looking for a positive you would say that it would help polarize the parties and bring democrats together behind the plan that they want to pass which is the plan that the administration is pushing forward. melissa? >> john harwood, thanks so much. will we see effective reform out of the summit or is this just political folly? let's bring in john sullivan fr director of research and investment strategy and we also
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have myrtle potter, former genentech coo and cnbc contributor. thanks to both of you for joining us. john, let me start with you. i was looking at a poll in "usa today" today, that 79% opposed the passage of a health care bill. is it political suicide it to keep going with this, would it make more sense to scrap it and start over? >> i think -- thanks for having me on. i think for lots of the members of the house and senate it's precisely political suicide for them to push through the democratic version of health kay reform. the american people have spoken. the american voters have spoke own several occasions. they don't want to see this version of health care reform get passed. >> myrtle, what's your reaction? scrap it or keep going? >> well, i think in many respects we have to keep going. everyone understands the economic pressures of the country. everyone also understands how people are suffering and so i think where we need to get to today which is exactly what this
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summit was intended to do and that is a point of compromise. i, for one, am anxious to see them getting past all of the rhetorical comments and the posturing and the positioning and really getting down to debating and trying to problem solve the areas where there's great disagreement. >> i guess the reality is the majority of americans to melissa's point don't want something like this at least at this point or this juncture in time because so many people are concerned about the reality of this economy and the job market. so it comes down, in some ways, to a question of timing, but, john, let me ask you in terms of what the american public is thinking right now about this program, are they worried that this is simply creating another entitlement program that we cannot afford? >> i think the worry about an entitlement program among americans is very real. i think there's also a concern that this version of health reform doesn't really address the fundamental problems, doesn't address the problems of dr. incentives and doesn't
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address the problems of redundant care or not wellpointed care and that's what the american people would like to see true health care reform undertake. >> on top of that, myrtle, you have the issue of how are we going to pay for this? it looks like we'll raise the tax on anyone making over 250, and also the insurance issue that we're not really leveling the playing field so that we have a complete open market so insurance companies can compete nationwide. >> i do think that -- i do think this question of insurance is an important one and despite the fact that we are working diligently, all of us, republicans, democrats, business people, consumers to bring together a solution at the crux of all this really is one big problem and that is not only the access that people have to insurance, but as you think about the large population of americans who are concerned about this bill, the fact of the matter is that even their insurance is vulnerable. just recently in the last week
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we saw a major insurance company go so far as to say that they had planned 30% to 40% increases in premiums. so the cost, in a very broad way is an issue and while -- >> go ahead. i'm sorry. >> and while we worry about the cost of bringing new people into this system we have to remember that those of us who have insurance right now, there's nothing that we've got right now that says what we have is stable and cannot be made vulnerable by changes and policy by insurance companies. >> cost is the biggest problem, john. i mean, if you look at -- insurance is 30% to 40% cheaper if you get it from your employer. that is a bizarre system where you have to be working for a big company in order to get affordable health insurance. how do we fix that problem? is that a tax incentive problem? >> no. no. there's clearly a problem in that people outside of large employers have a hard time getting well-priced insurance. i do believe in this congress
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we'll see some sort of legislation that addresses that, whether it's to allow individuals to better band together and become group buyers. i do believe we'll see some sort of a -- some progress in that regard. >> i don't know. i hope so. thanks to both of you for joining us. we appreciate it, trish? >> after the break. a major milestone for apple and we'll have the story for you. >> plus our phil lebeau's interview with akio toyoda. his action plan on rebuilding the automaker's reputation. you're watching cnbc, first in business worldwide.
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okay. welcome back to "the call." i am trish regan. we want to get you caught up on these markets. a very big day. we are looking at fresh lows on the dow. the s&p off 17 points. 1,087. meanwhi meanwhile, take a look at the dow, near session lows, i should point out. all of these concerns with the job market, the jobless claims coming in weaker than expected and this comes on the heels of poor consumer data and housing data just yesterday. you also have a lot of worries about the european debt situation. so you can see the market reacting to all of this nasdaq composite index off 1.5% right now, 33 points. all of the chipmakers are seeing some downside today and we should go over here to the european markets because so much of this concern is really coming out of greece and the european debt market. see how that's affecting equities there, ftse, cac, dax, all traded down in today's session. they have all closed. let's head over to melissa.
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a day after apologizing before congress, akio toyoda is meeting with employees. our phil lebeau caught up with the head of the battered japanese auto giant and he joins us with more now on his big interview. phil? >> melissa, this is all about akio toyoda taking the message we heard in washington the last couple of days, the apologies and promises to do better, taking that message from washington and spreading it out to toyota employees and dealers. what he is going to say is similar what we heard from it him last night in when we caught up with him in washington. we sat down for an extended interview and he started by apologizing for the recalls and problems of toyota and he's sorry for the quality issues and that he believes toyota has found a fix for its problems. >> translator: we are confident that there is really no problem in our design and this failsafe concept is well incorporated into it, however, having said that, i know there have been problems on the road, and we are in the process of trying to find
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out what possibly could have contributed to cause these problems. our engineers have been working very hard 24/7, eaven before i came here and yet we were not able to pinpoint or re-create or to reduce what may have happened on the roadways so we wanted to say that our vehicles are safe. >> you mention theed the electronic throttle control. you have been unable and i say you, toyota, but the outside experts and the firms you hired, your own engineers, you have been unable to find a definitive problem with the electronic throttle control. yet at the same time, if i'm understanding what you just told me correctly, you acknowledge that there is the possibility that there may be a problem in the electronics. does it worry you that there seems to be a disconnect there? you can't find a problem, yet there may be a problem? >> translator: well, it's not that i have any sense of skepticism that there may be possibly an issue.
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no, that's not what i'm saying at all. given at the level of present-day technology, and we have tried everything we possibly could, and i can state today that our vehicles are completely safe. >> in our half-hour conversation akio toyoda said several times toyota vehicles are safe. that said, he committed the company to looking at all aspects of the design when it comes to the throttle control. for now, toyota says they do not find a problem with the electronics, but he is committed to revisiting that topic and certainly, trish, that's going to be something that will be under scrutiny here in the united states for weeks and months to come. >> it certainly is. okay, phil le be, thank you so much. joining us to discuss ben bernanke's testimony on capitol hill is senator jim bunning, the republican senator from kentucky and the member of the senate banking committee. good to see you, senator bunning. >> good to see you. >> your reaction to mr. bernanke's testimony so far? >> mr. bernanke has a very, very
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different type of set of glasses than i do. his are rose-colored, mine are clear. unless i get in the sunshine, and then they get very dark, but the projections of cbo, as far as the economy's growth in the next two years is about 100 basis points lower than the federal reserve's projections for growth in the next two years. each year. >> yeah. so you're very worried about this economy. certainly the market is worried about this economy and one of the concerns that a lot of traders have is how much money is being spent to try to get this economy on track. how do you balance all of the spending going on with the low interest rates we have right now? >> well, obviously, the low interest rates has created the atmosphere for making major expenditures into private sector
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economy -- >> well, i'm talking about government spending here. >> i'm talking about government spending, but it's government spending in the private sector whether it be banking, whether it be financial institutions, whether it be automobile companies, but all of that spending hasn't created any jobs and the big problem with this recovery is the lack of the participation of the individual in the recovery. in other words, if we don't have a consumer-driven recovery we're not going have a recovery. >> senator, you say he's looking through rose-colored glasses that the economy is worse than he says it is. what does that mean to you? what would you like to see happen to turn that around? >> i would like to see us spend monies realistically on things that create jobs. >> like what?
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>> well, small business tax credits. give the small business people who create about 65% of the jobs in the united states presently, the opportunity with -- don't end the bush tax cuts. -- and ben bernanke cannot control what congress decides to spend money on. i mean, when we get back to the fed chairman, what do you think he can specifically do with his policy tools in order to help this economy right now? do we keep interest rates low? do we start to raise them? >> well, he didn't do his job. that's what happened. his oversight of the banking community, the mortgage community, they didn't do their job. it started out with greenspan. bernanke for four years didn't write a regulation. as far as oversight of what we call the subprime market, and that was the stimulus that
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started us on the downhill slide. >> but, senator, he issued a challenge to you not in so many words, but he said, you know, everyone is can asking me about my exit strategy, what is congress' exit strategy to all this fiscal stimulus and what will you do about the deficit in the long run. how do you answer that? >> well, my question to him is i don't think he's got the guts to exit what he has done as far as lowering the rates. i don't think he'll have the courage and conviction to go up as far as he came down and stayed down. >> yes, but melissa's question is about congressional spending. >> does congress have the guts to stop the spending and to deal with the deficit at the end of day? >> on what is considered other than our social security, medicare and medicaid? no, they don't. the answer to your question is that 75% of our economy and our
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spending will be on things that we do not control and that are on automatic pilot. until we take control of those things like social security, medicare and medicaid, we don't have the courage in the congress to do that, and in the proposal the president sent us there is nothing that even touches those things. >> all right. sounds like a bad day for the dollar. senator, thanks so much for joining us, i think. >> glad to do it ever time. >> "mad money high noon" is coming up at the top of the hour and jim cramer is here with what's in store. are you selling the dollar after that interview? no one has the guts to put the brakes on, that was my takeaway. >> i tell you, i had rose-colored glasses in the 1964 philly season when jim bunning was on the mound and i had world series tickets and you know what? they didn't have the guts to be in the world series. anyway, we have clean energy
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fuel ceo andrew littlefair. we'll be talking about whether march ral gas has a shot to be able to be used in actual vehicles and we have macy's ceo, terry lundgren. hey, i wonder if they can keep up with the kohls', that had a great quarter. we're looking forward to the half hour. >> following "mad money" is a special edition of "fast money," and they will join melissa lee and the whole gang at 12:30 p.m. eastern time here on cnbc. >> coming up next, jamie dimon meeting shareholders. he'll tell us what he's been saying about yp morgan's future. apple is hitting a major milestone. details on that coming up.
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kohl's reporting a higher than expected quarterly profit and the first quarter and 2010 earnings could fall below analyst forecasts. right now the stock is trading higher on the day by more th than.5% at 53.45. trish? >> j.p. morgan chase' ceo jamie dimon is meeting with investors to give his outlook for the
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banking giant and the financial landscape. j.p. morgan shares trading down more than 2%. cnbc's mary thompson joins us live from the meeting in new york with the very latest. hi, mary. >> hey there, trish. thanks so much. we're going to hear from jamie dimon later in the day. we had the company's cf on, mike cavanaugh kicking off this all-day investor day today and he said despite continuing challenges in the economy, basically gave a pretty upbeat assessment of the outlook for j.p. morgan. basically, he cited the strength ofst diverse business mix and as a result, the firm is going to be targeting a doubling of net income in 2010 to 22 to 24 billion and that's up from 11.7 billion last year. as expected, cavanaugh touted the bank's fortress balance sheet which will allow it to handle any changes to the consumer credit environment. >> what happens with credit, what happens with the economy obviously, we're in a position to handle that whichever way it goes, the sooner the better, but
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the longer it's just a matter of us unfortunately taking more of our earnings and absorbing more losses. >> a couple of the challenges the bank faces in 2010 along with high level of credit costs, he said economic uncertainty and legislative and regulatory changes and it does result in the higher capital levels the company is able to absorb them. also more competition both at home and abroad. during today the head of j.p. morgan's six businesses will outline their views of the year. we actually just heard from the new head of the firm's investment bank, russ daly and he's not planning a strategic shift in the business, but he does see a reduction in capital markets and in large part because of capital raising by financial firms and although they're hoping for a pickup in strategic deals the company is also facing a head binned because a lot of these firms are going to be decreasing capital spending. these are j.p. morgan's clients. other challenges include a compression in the fixed income margins for the investment bank. this, of course, was an area of growth for the investment bank.
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a strong area of profits for it last year and also because of regulatory changes there boosting capital to $40 billion from 33 billion. they're targeting a return on equity at 17% for the investment bank this year and their growth areas of focus are the emerging market commodities as well as technology. they want to -- they're actually spending a lot of money on technology to improve their platform. the compensation continues to be an issue in investment banking and he didn't elaborate as to whether or not j.p. morgan will be changing its compensation structure. back to you. >> mary thompson. thank so much. a quick break and then ten billion. ootz a big number and find out why ootz big for apple. we have the market call heading into this afternoon's trading session and looking at the board at 177 on the dow. you are watching krshgsz nbc, first in business worldwide. $$
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okay. we want to take you back live to the obama health care summit where things have been getting a little bit heated. let's listen in. >> we do not agree about the fundamental question of who should be mostly in charge, and you identified this question as central. do you trust the states or do you trust washington? do you trust patients and doctors making the decision or do you trust washington? now, there's a mix of both, of course, in health care, but there is a big difference between our approaches and there is so much in the bills that xroo you've supported that puts control in washington that we
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have a difficult time supporting those provisions and it's not a matter of we all agree on reducing waste fraud and abuse. it's how you do it. let me give you a couple of examples. dave camp, i think, pointed out the answer to the dispute that you and lamar alexander had a moment ago and he was exactly right. let me quote from the congressional budget office letter. this is from doug elmendorf, quote, cbo and tax committee estimate that the average person covered would be about 10% to 13% higher in 2016 than the average premium for nongroup coverage in the same year under current lieu. oliver wineman, a very respected third party says it's even more like 54% in my state of arizona, 72% increase. why is it so? for a variety of reasons but one
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of which both you and dave kemp agree on, it is a richer benefit. how did it get that way? because the federal government would mandate it under your legislation in the insurance exchanges and as a result there would be a higher cost. how does this happen? there is an actuarial requirement of 60% actuarial value in exchange for the least costly plan, but the average in the country today of a high deductible plan is 48%. the range today is 40 to 80% and the average is between 55 and 60. so what the government is doing here is saying we're going to mandate that the insurance cover more things than it does right now and therefore the cost is going to go up. second example, you say how can we help small businesses? well, we know where you don't raise small businesses by raising the medicare payroll tax on them which is what this legislation does. besides that, it's a job killer. look at the taxes on beneficiaries as well. this is a third example.
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you don't cut costs when you raise taxes on medical devices that help us, when you raise x taxes on pharmaceutical products and when you raise taxes on the insurance premiums themselves. quote, these fees on insurance, medical devices and pharmaceuticals would increase costs for the affected firms which would be passed on and would ultimately raise insurance premiums by a correspondent amount, congressional budget office. so when you raise these taxes all of the different fees that are in this legislation, it inevitably increases the costs on the consumer and why do you have to raise all of this money? because of the expenses of the legislation that underlie all of this. that's why would rather start not by having to raise a lot of money in order to pay the high cost of this bill, but to start a piece at a time, directing solutions to specific problems. that way you don't incur all of the costs up front which require you to raise the taxes.
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the last quick point. one of the worst things about this is for people that have catastrophic medical expenses today after you've spent 7.5% of your adjusted gross income you can deduct that. this bill would raise that to 10%. who does that hurt in the the very people you promised mr. president that you wouldn't allow taxes to be raised on. average age, 45, average income $65,000, these are not wealthy people. just another example why the bill has to raise so much money ittens up helping the very people we want to help. >> okay. i'm going to go to you, jim, but since as has tended to happen here we end up talking about criticisms of the existing bill as opposed to where we might find agreement. i feel obliged just to go through a couple of the points that you raised. just to go back to the original argument that lamar and i had and we've now chased around for quite some time.
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look, if i'm a self-employed person who right now can't get coverage or can only buy the equivalent of acme insurance that i had for my car. so i have some sort of high-deductible plan, it's basically not health insurance, it's house insurance. i'm going to -- i'm buying that to protect me from some catastrophic situation, otherwise, i'm just paying out of pocket. i don't go to the doctor, i don't get preventive care. there are a whole bunch of things i just do without, but if i get hit by a truck, maybe i don't go bankrupt. so that's what i'm purchasing right now. what the congressional budget office is saying is that if i now have the opportunity to actually buy a decent package inside the exchange that costs me about 10% to 13% more, but is actually real insurance, then there will be a bunch of people
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who take advantage of that. so, yes, i'm paying 10% to 13% more because instead of buying an apple i'm getting an orange. there are two different things. now you can -- you can still -- you still have an option of -- no. no. let me finish. what the way that this bill is structured uses a high cost pool, a catastrophic pool for people who can't afford to buy that better insurance, but overall for a basic package, which by the way, is a lot less generous than we give ourselves in congress, so i'm amused when people say, you know, let people have this not so good plan, let them have a high deductible, but there would be a riot in congress if we suddenly said
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let's have congress have a high deductible plan because we all think it's pretty fornt provide coverage for our families and the federal health insurance program has a minimum benefit that all of us take advantage of. >> and i haven't seen any republicans and democrats in congress saying you know what? we should have more choices and not have to have this minimum benefit. so what we're basically saying is we're going to do the same thing for these other folks that we do for ourselves on the tax payers' dime, by the way. there is a philosophical difference around that, but i think it is very important for us to remember that is aing there's a baseline of coverage that people should be able to get if they're participating in this big pool is not some radical idea. and it's an idea that a lot of st